Last week, we established that if safaricom declares sh21 billions in profits after tax, the PE ratio would be 9.52. that emerging market
telephony has an average PE of 17.00, therefore, the fair market price would be sh5/9.52 x 17 = sh8.928 per share. I congratulate Raj Bains,
who had the first correct answer. Now, we have to survey the landscape and take some other factors into consideration. the first issue
is whether the market is bullish or bearish. Perfectly good companies will struggle to make upside progress in a bear market. a rising tide (bull
market) tends to float a lot of boats. so we need to put a bias into the model. I have a dear friend and one of the best traders I know and when folk
ask him for investment advice, he responds, "It’s a bull market, don’t you know?" Many People are disappointed because he does not say
more than that but he is signaling a key consideration. the second consideration is the set up. Do buyers have the holding power? How is
the equation between buyers and sellers? It’s not rocket science. there are hundreds of markets all over Kenya. the bourse is no different. Let’s start
with Kenya retail, that’s you and me. are we all going to be ‘scalpers’ and ‘flippers’? Most People have taken short term loans; the year has been
tricky for all of us. It’s going to get a lot better but many folk will be biased towards booking a profit and flipping the shares quickly. We also have
foreign investors? are they going to be of the same mind set? and somewhere in the background, Vodafone might be lurking in the shadows.
I know if I was Mr sarin (Vodafone head) I would be thinking I need 16 per cent to put myself in the majority and I would be happy to pay a
premium for that 16 per cent so that I am finally in a majority and in charge. and this is where investing becomes more of an art than a
science. and the final factor is we need to study the tape, that is the share price from the day it starts trading. If you really want to maximise your returns
(and for many this is a very big outsized investment), you need to know the price at all times. It is going to make a very big difference if
you sell at 7, 8 or 10. If it trades sh10.00 and you are expecting your very kind broker to remember to call you, there is a fatal flaw in
your strategy. You need to be calling him or her and saying, ‘Its trading at sh10 , please sell my shares.’
Aly-Khan Satchu
www.rich.co.ke
is the author of
Anyone Can Be Rich
Tuesday, May 20, 2008
Thursday, May 8, 2008
AccessKenya in buy-outs plan
By Nation AccessKenya shareholders on Thursday gave the firm a go-ahead to acquire more companies in the information and communication technology sector to consolidate its position in the market. Last year, the ICT company acquired Openview Business Systems and Today’s Online, an internet service provider. The much-needed approval by shareholders during their first annual general meeting since listing at the Nairobi Stock Exchange in June last year, will now allow the firm to invest Sh600 million in a number of buy-outs soon. Of the available funds, the company will spend Sh200 million in a new residential network in Nairobi and Mombasa. A further Sh100 will be injected into The East African Marine System (TEAMS) project spearheaded by the government. The project is meant to link the country to the rest of the world through a submarine fibre optic cable. The remainder, Sh300 million, will go towards strategic acquisitions as the company seeks an increased market share of its corporate IT services segment. Shareholders also allowed the AccessKenya board to increase its capital base to 500 million shares that would be used for further fundraising in case of an acquisition, share split or a bonus issue. The company currently has an authorised share capital of Sh250 million shares with just over 200 million shares issued. “This is a strategic plan to give us flexibility though we are yet to decide on what exactly to do with such shares,” noted the board’s chairman, Mr Micheal Somen. AccessKenya directors had also sought from its shareholders the right to make any acquisitions below Sh200 million, or less than 5 per cent of the company’s total market value, without the hassles of calling an extra-ordinary general meeting. “We would rather the Sh3 million spent on hosting an EGM goes to your dividends instead of tedious and expensive meetings,” said Mr Somen. He promised that all targeted acquisitions would be done above board though currently, any negotiations were secret due to ‘commercial challenges of exposing impending deals. | |
Sunday, May 4, 2008
It's all about Collective Investment
Last year (2007) Housing Finance launched a 10-year fixed interest rate mortgage initially targeting investment groups wishing to put up houses either for owner occupation or speculative business.
Written by Eleanor Kigen
April 25, 2008: There is one advertisement I like on CNN. Although I cannot remember the exact words, I find the message powerful. It talks about the impact that a collective group of people can have on the world. They can change it. Alone, it is virtually impossible.
This rings true in the financial world as well. When people come together with different ideas and each with their small savings, they can create something great. Just this week I was reading a book called The Second Bounce of the Ball.
Among its many lessons is that if you want to grow, you need to build a network with whom you can be able to achieve a lot. Collective investment vehicles are a good way for investors to bring together their monies and be able to make bigger investments with much bigger returns.
Alone, each of the investors can be able to invest in a few shares of Kenya Airways, Kenya Commercial Bank, Athi River Mining and so on. But together, they can be able to take over a company, turn it around, make money and sell the investment at a profit.
But for such a venture to work, the people who come together have to have a common goal. They have to know where they are going. They have to believe in the vision. If you belong in an investment group, you have already started the journey.
Do you meet regularly? Do you have clearly defined goals? A clearly defined strategy? Do you have regular meetings? Do you have laid out procedures for making decisions? Do you follow your decisions through?
Do you have an eye for opportunity? Do you take calculated risks? There are clearly many things that have to be taken into account in order to guarantee success of your group.
There are also some other types of collective investments that do not require your exerted effort on a day to day basis.
Sometimes as an investor though, you are looking for investments that offer you optimum returns and diversification in a certain sector, or market capitalisations, or blue chip counters.
In more advanced markets, we have exchange traded funds which give you exposure to the type of counters that you want, be it financials, blue chip counters, large market capitaliasation companies, small capitalisation companies.
In the Johannesburg Stock Exchange (JSE), we have what is called the Satrix Securities which are listed collective investment schemes which can replicate the dividend and price performance of a particular index.
The returns that accrue to you are almost the same if you had directly purchased each of the individual securities on the JSE index. On your own, trying to get exposure to the index is not only time consuming, it is costly.
The advantages of purchasing the Satrix Securities include; lower transaction costs, since the shares on the index do not change frequently it is mostly a buy and hold strategy.
Secondly, a single transactions gives you exposure to a wide range of securities and the selling price moves according to the Net Asset Value. At any time you can know how much you are worth. Some of the Satrix funds include; the Satrix 40 which includes the top 40 companies on the JSE, Top 25 listed industrial companies index, top 15 financial companies index, if you are interested in dividends, you can invest in the Satrix Dividend Plus.
The biggest disadvantage of investing in exchange traded funds is that you can never beat the market. If the market is on an upward rise, you can only make market gains and your losses will be limited to the market losses.
Ultimately, it depends on you, the investor – on your risk appetite and the kind of returns you are looking for. There are many opportunities for collective investments even including gold! If you are looking for above market gains, exchange traded funds might not be the way for you.
Written by Eleanor Kigen
April 25, 2008: There is one advertisement I like on CNN. Although I cannot remember the exact words, I find the message powerful. It talks about the impact that a collective group of people can have on the world. They can change it. Alone, it is virtually impossible.
This rings true in the financial world as well. When people come together with different ideas and each with their small savings, they can create something great. Just this week I was reading a book called The Second Bounce of the Ball.
Among its many lessons is that if you want to grow, you need to build a network with whom you can be able to achieve a lot. Collective investment vehicles are a good way for investors to bring together their monies and be able to make bigger investments with much bigger returns.
Alone, each of the investors can be able to invest in a few shares of Kenya Airways, Kenya Commercial Bank, Athi River Mining and so on. But together, they can be able to take over a company, turn it around, make money and sell the investment at a profit.
But for such a venture to work, the people who come together have to have a common goal. They have to know where they are going. They have to believe in the vision. If you belong in an investment group, you have already started the journey.
Do you meet regularly? Do you have clearly defined goals? A clearly defined strategy? Do you have regular meetings? Do you have laid out procedures for making decisions? Do you follow your decisions through?
Do you have an eye for opportunity? Do you take calculated risks? There are clearly many things that have to be taken into account in order to guarantee success of your group.
There are also some other types of collective investments that do not require your exerted effort on a day to day basis.
Sometimes as an investor though, you are looking for investments that offer you optimum returns and diversification in a certain sector, or market capitalisations, or blue chip counters.
In more advanced markets, we have exchange traded funds which give you exposure to the type of counters that you want, be it financials, blue chip counters, large market capitaliasation companies, small capitalisation companies.
In the Johannesburg Stock Exchange (JSE), we have what is called the Satrix Securities which are listed collective investment schemes which can replicate the dividend and price performance of a particular index.
The returns that accrue to you are almost the same if you had directly purchased each of the individual securities on the JSE index. On your own, trying to get exposure to the index is not only time consuming, it is costly.
The advantages of purchasing the Satrix Securities include; lower transaction costs, since the shares on the index do not change frequently it is mostly a buy and hold strategy.
Secondly, a single transactions gives you exposure to a wide range of securities and the selling price moves according to the Net Asset Value. At any time you can know how much you are worth. Some of the Satrix funds include; the Satrix 40 which includes the top 40 companies on the JSE, Top 25 listed industrial companies index, top 15 financial companies index, if you are interested in dividends, you can invest in the Satrix Dividend Plus.
The biggest disadvantage of investing in exchange traded funds is that you can never beat the market. If the market is on an upward rise, you can only make market gains and your losses will be limited to the market losses.
Ultimately, it depends on you, the investor – on your risk appetite and the kind of returns you are looking for. There are many opportunities for collective investments even including gold! If you are looking for above market gains, exchange traded funds might not be the way for you.
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